Societe Generale v Statoil Asia Pacific Pte Ltd

JurisdictionSingapore
CourtCourt of Three Judges (Singapore)
Docket NumberCivil Appeal No 62 of 2000
Date10 November 2000

[2000] SGCA 61

Court of Appeal

Yong Pung How CJ

,

L P Thean JA

and

Chao Hick Tin JA

Yong Pung How CJ

and

L P Thean J

Chao Hick Tin JA

(dissenting)

Civil Appeal No 62 of 2000

Société Générale
Plaintiff
and
Statoil Asia Pacific Pte Ltd
Defendant

Sarjit Singh Gill SC, Suhaimi Lazim and Ng Yeow Khoon (Shook Lin & Bok) for the appellant

Lawrence Quahe and S Suresh (Harry Elias Partnership) for the respondent.

Contract–Contractual terms–Construction of contract terms–Application of proviso–Whether oral agreement made between parties–Whether right of recourse existing

The appellant bank (“Soc Gen”) offered a certain banking facility to the respondent (“Statoil”) as a means of securing the latter's business of selling petroleum and petrol-related products. Under the facility, whenever a shipment of petroleum products was made by Statoil to a buyer approved by Soc Gen, the buyer would issue to Soc Gen a “payment undertaking”, whereby the buyer undertook to pay Soc Gen, for the account of Statoil, the amount due on the invoice. Upon receipt of the payment undertaking, Soc Gen and Statoil would sign a payment confirmation and invoice discounting agreement (“PCID agreement”), under which Soc Gen undertook to pay Statoil the sum due from the buyer, as stated in the payment undertaking. It was further agreed that Statoil would pay Soc Gen a non-refundable upfront risk commission at a stated rate and Soc Gen would discount the amount due on the invoice at a stipulated rate. Sometime in May 1997, Soc Gen made a material amendment to the PCID agreement by adding a proviso to Soc Gen's payment obligation. The proviso allowed Soc Gen to have recourse against Statoil in the event of default by the buyer except where the default was due to either the decision of any government having jurisdiction over the buyer to declare a moratorium on payment by the buyer due to political reasons or because the buyer had become insolvent. No express proviso was added to the invoice discounting arrangement.

From October 1996, the above facility was made available to one of Statoil's buyers, SUSCO. During the period December 1997 to April 1998, SUSCO defaulted in making payment under 12 payment undertakings issued by them to Soc Gen. Soc Gen had already signed PCID agreements in respect of each of the 12 payment undertakings and therefore made 12 payments to Statoil.

Soc Gen commenced the present proceedings against Statoil, seeking to recover the total amount it paid to Statoil under the 12 payments, which were made under the invoice discounting arrangement. Its claim was based essentially on the proviso that was added to the PCID agreement. Although the proviso in the amended PCID agreement appeared to only qualify the payment obligation, Soc Gen argued that the proviso extended to the invoice discounting arrangement as it had orally agreed with Statoil to such an express term sometime between September and October 1996.

The trial judge did not make a specific finding on whether there was such an oral agreement between the parties. He found that as SUSCO was insolvent, it fell within the limited exceptions to the proviso and therefore, Soc Gen was not entitled to have recourse against Statoil. Soc Gen appealed.

Held, dismissing the appeal (Chao Hick Tin JA dissenting):

(1) The allegation of the existence of the oral agreement was extremely unconvincing. The alleged oral agreement took place before the amendment to the PCID agreement was made and yet the oral agreement was not incorporated at the same time when the proviso was added. In any event, the amendment made in May 1997 superseded the oral agreement, assuming there was one. Thus, there was no basis for Soc Gen's claim that there was an express term orally agreed between it and Statoil, whereby the discounting arrangement was to be on a with-recourse basis, except in the two circumstances stated in the proviso: at [18] and [20].

(2) Once Soc Gen made payment to Statoil under the discounting arrangement set out in the PCID agreement, the payment obligation of Soc Gen became spent since it had purchased the amount due from SUSCO, and thereafter nothing was due from SUSCO to Statoil. Soc Gen then became entitled to exercise the rights of Statoil to recover the sums due from SUSCO. Consequently, Soc Gen's claim against Statoil failed: at [21] and [22].

Per Chao Hick Tin JA (dissenting):

Agreeing with the reasons given by the trial judge: Soc Gen's claim failed as SUSCO was insolvent, this being one of the grounds on which the payment obligation stood. There was also no commercial dispute between Statoil and SUSCO so as to entitle Soc Gen not to pay Statoil: at [23].

L P Thean JA

(delivering the grounds of judgment of the majority):

Introduction

1 The appellant bank, Société Générale (“Soc Gen”), instituted this action against the respondent company, Statoil Asia Pacific Pte Ltd (“Statoil”), claiming the sum of US$4,408,599.73 together with interest. Their claim was dismissed by the High Court, and they appealed against the dismissal. We dismissed the appeal, and now give our reasons.

Facts

2 The respondents, Statoil, are a company incorporated in Singapore and are engaged in the business of selling petroleum and petrol-related products. They are a wholly-owned subsidiary of Dan Norske Stats Oljeselskap AS (“Dan Norske Oil”), the national oil company of Norway. Dan Norske Oil and their subsidiaries had a long-standing corporate policy of only trading with customers on a secured basis. Soc Gen had a good business relationship with Dan Norske Oil in Europe, and for some years had been attempting through their Singapore branch to extend their banking and other services to Statoil, but without much success. They were aware of the corporate policy of Dan Norske Oil and their subsidiaries.

3 Sometime in early 1996, Soc Gen offered a certain banking facility to Statoil as a means of securing the latter's business. The proposed banking facility was called the “Payment confirmation with invoice discounting facility” (“the facility”). It was to be available only in respect of those buyers trading with Statoil, who were acceptable to Soc Gen. The facility would operate in the following manner. Whenever a shipment of petroleum products was made by Statoil to an approved buyer, the buyer would sign and deliver to Soc Gen a document expressed as a “Payment Undertaking” (“Payment Undertaking”), under which the buyer would confirm its purchase of a shipment of oil product from Statoil at a certain price and undertake that, upon Soc Gen presenting the seller's commercial invoice and relevant shipping documents from Statoil, it would pay to Soc Gen, for the account of Statoil, the amount due on the invoice on the due date of payment. Upon receipt of the Payment...

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